Ask Slashdot: Could Open Source be used as a Tax Writeoff? 30
kernel
submitted this interesting question:
"Say that I am a manager at a for-profit software
consulting firm. One of the projects I supervise
relies on a GPL'd software application. The
team has greatly improved the application, releasing the
changes back to the public. In some twisted
sense, this seems like charity work; is
there some way my company could justify the
expenses as a tax writeoff? If not, why not?"
Good question!
kernel continues... "This seems like a great rationalization for companies otherwise unwilling to devote resources to Open Source software. If companies would tend to use and improve Open Source products more often if they had a way to recoup some of their investments (via tax savings), we would all be better off. My only thought is that pieces of free software could be loosely 'held' by a legitimate charitable organization and time spent working on those products could be written off as a donation. Any insight greatly appreciated."
Anyone else think this might be another way to leverage the Open Source development model into big business?
Clear example of people not Getting It (Score:1)
The costs of producing software are already deductible so long as they can reasonably be argued to have something to do with company operations.
No need to figure out charitable arrangements.
No need to track who's using the software.
Consider the following two situations:
Note that in the former case, the software development costs are highly likely to be considered an "expense" for tax purposes.
And somehow this discussion thread starts because people have the silly notion that because the GPLed software is used somewhere else that this is somehow a "charitable arrangement."
It's not. Expenses are tax deductible. Keep bureaucracy out of it.
Foolish Tax Games (Score:1)
Obviously we have too many "wage slaves" here who don't understand enough about business and taxation to be safe around attempts to set policy.
- Business expenses are deductible.
- The costs of producing software are a business expense.
- Producing software where no sales revenues are received merely cuts down on sales.
Are there exceptions? Surely there are.(So long as the business has a "reasonable expectation" of profit. If the business pays taxes, that's liable to be proof enough.)
Look at the financial statements for IBM, Microsoft, Netscape, and Oracle, if you don't believe me. These companies, as well as virtually all businesses that produce computer software, treat software production costs as business expenses for the purposes of financial reporting as well as for tax purposes.
Amazingly, none of them do so via any role involving "charitable foundations."
Note that the wages that you wish you were getting paid for your work are not an expense for tax purposes.
Unless, of course, the business actually does pay you a salary, in which case you have to pay taxes on that income.
Note that this means that if the FSF pays RMS, he has to pay taxes on that income. Which means that while you may have put off paying taxes by giving the FSF money, the IRS still gets "their" money at the end of the day.
In short, trying to play tax games (that people quite evidently don't understand ) in order to try to improve funding of free software is counterproductive. I suggest the alternative of just plain giving folks money instead.
Back in my days doing tax work (working for one of those "evil tax accountants" that search for the fabled loopholes), many clients would jump into simply stupid investments that would lose them money just to cut their tax bill. At the end of the day, they'd have lost money. Thousands of dollars in the toilet. They apparently felt good about this because they denied the government some tax revenue. Let's not go there, please?
Don't ask us, ask your lawyer, NOW! (Score:1)
Inform your company tax people to check this out. If your a large company they are in house, if you are a small company find your tax lawyer/accounant.
You will have to expiciatly keep track of how much time you spend on OSS, and then release it all to the net with a little legal disclaimer. Your lawyer will be picky about exactly how it is done (your company doens't want to take responsibility). Fortunatly you can donate to the Free Software Foundataion, the FreeBSD project, and similear orginizations for most software.
Do NOT ask /., we are not lawyers. We all will think it is a great idea, but can't say if it will work. Also rules vary country be country, and /. is an international forum.
Money grubbing capitolists (Score:1)
Business expenses (Score:1)
GPL code, tax writeoffs and the FSF (Score:1)
Scenario 1: cost of development:$100K, revenue when given away: $0 - tax writeoff (against other revenue): $100K.
Scenario 2: cost of development:$100K, revenue realized: $200K - $100K profit (not $200K) is subject to tax on profits.
Same writeoff, though it is applied against related revenues instead of unrelated ones.
The complication here stems from the fact that a commercial venture is supposed to have a reasonable expectation of profit. IOW, you can't just give away code for a tax writeoff unless you (eventually) have some revenue against which the writeoff can be applied.
This doesn't apply very much to corporations, but is relevant to individuals who might wish to contribute GPL code that they developed, and write off the value of their development time against other income. Since giving stuff away, by itself, is not a commercial venture, I doubt the IRS or Revenue Canada would allow the write-off (disclaimer: I am not a tax professional so consult your own tax advisor).
Ideally, then, GPL software donated by individuals should give rise to a tax-writeoff against other income (well, no: ideally, there would be no tax and the matter moot, that's just my libertarian bias showing).
How can this be achieved? The easiest way would be to make a money donation to an organization like the FSF, which could then pay one back for the development, at cost, of the software you donate. The money donation is a charitable tax writeoff and the revenue from the sale is offset by the development cost of the code, deemed to be a wash if the software is 'sold' at fair market value.
Of course, what is the 'cost' of developing a piece of code? Industry pay-rates for development of similar code can be averaged and multiplied by the time spent developing it. Keeping time-logs would be important here.
Quite amusing (Score:1)
Regards Tobias
Your time is not tax deductible (Score:1)
In some cases you can get a tax deduction for donating money, or mileage on your automobile.
But I'm not aware of any charitable donation tax write-off for your time.
There is also already a pretty strong impression that OpenSource "Free" software is not really free, but paid for by tax dollars. Do you really want to continue this negative impression?
Tax Free Organization (Score:1)
Friggin' IRS....
What about the commercial gain from OSS... (Score:1)
As for the private programmer, that may be a different case.
--
Aaron Gaudio
"The fool finds ignorance all around him.
you wacky wacky people! (Score:1)
Tax Writeoff for charity (Score:1)
1) To be used as a "charitable donation" normally requires that the recipient be a federally registered charity
2) All costs of software development are normally costs of doing business and as such are deductible ( at least to a business). However, if one were to approach this on your personal income tax it would differ a bit..
good luck (Score:1)
Deducting the salary expense would not be an issue, but determining a "fair value" of the product would not be as easy. And as my old tax profs used to say, "the IRS is always looking out for you."
Existing tax code is so screwed up because congress is constantly plugging loopholes. If you find one here, you can bet that the IRS will get congress to plug it pretty quickly.
DISCLAIMER: I hate tax. I never did good in tax class. I am not a cpa. I passed the cpa exam, but the tax part made no sense to me.
Tax Free Organization (Score:1)
** Martin
Organization Controlling GPL'ed Software???? (Score:1)
I for one will not write any software for free if some company/org controlled by someone (may it be ESR or God, although for some they are one and the same
The prospect of writing code for the PUBLIC is very alluring to INDIVIDUALS. Some might argue these INDIVIDUALS are the smarter ones in the industry, and are VITAL for the open source movement. Such a move, IMHO, will discourage individuals and encourage CORPORATIONS or small companies for tax reasons. That might well mean BAD code and hence, the DOWNFALL OF THE OSS movement!!
I don't think this is a good idea at all. If corporations don't feel like doing a service to the general public, they can sell their products. Wanting a reward for charity is the most bogus ideal ever.
(Everything above is wrong. What you think is right. Ok? Now go suck your thumb and lay in your mother's lap.
Revenue-Expenses=Taxable Income (Score:1)
As long as you can prove that the time spent on an open source project is a real business expense then it can be written off. As for personal time donated to OSS I doubt it can be written off. That is unless you can also write off time donated to a soup kitchen or other charity. If there is no income from an activity then there is no write off.
Now if someone can figure out a way to get a tax credit (act of congress) for OSS development then great...
Wow, the AC from Microsoft has spoken again (Score:1)
there's a moral here somewhere (Score:1)
What difference does this make if you don't contribute good software anyway?
Is all open-source software a public good? (Score:1)
Okay, so let's say someone writes a package that makes email-spamming easier, and they distribute it as open source. Should that be tax-deductible? Personally, as a taxpayer, I don't think I'd want to see the government supporting spam, which is what the tax write-off would amount to in that case.
But do you want the government put in the position of deciding on a case-by-case basis which open-source packages deserve tax writeoffs? That doesn't seem like a good idea either, considering, for instance the influence of big business on most governments, and the incompetence of most bureaucracies to make technology-related decisions.
Charity Work (Score:1)
I would speculate (and I'm not a lawyer) that trying to take a deduction for working on open source software is in the same bucket. And with
Eric Raymond's paper explaining how the reward is intellectual, the IRS could successfully argue that your "donation" is definately not charitable since it involves ego gratification. If you persist, they may go even further and want to assess the economic value of the ego gratification received and tax you on that... *evil grin*
Probably the only thing that you might be
able to do:
a) Create a charatable organization to create open-source software (GPL style, cuz you can argue that the Artistic license is _not_ charitable since it gives the creator "artistic control" in exchange for others's use)
b) You and _lots_ your friends donate to it (otherwise it will be a private foundation, with no tax advantages).
c) The organization could buy equipment and items necessary for the creation of open source software.
d) The organization can _allow_ you to use its
equipment for its charitable purpose.
e) The catch is: You must provide a non-biased mechanism so that your donation dosn't necessarly benifit you (with the use of the computer). Thus, an independent board of directors would be required, and a "grant" mechniism would be put in place, where you (and anyone else who wanted to take advantage of your donated money) can submit
Overall, I'd leave trying to beat the IRS out of it. If you do it wrong, it could cost you _way_ more in heart ache and money than you could possibly imagine!